EXHIBIT 10.23
STOCKHOLDER'S RIGHTS AGREEMENT
THIS STOCKHOLDER'S RIGHTS AGREEMENT (the "Agreement"), is made and
entered into this 30th day of August, 1994, by and among WARBURG, XXXXXX
INVESTORS, L.P., a Delaware limited partnership ("Warburg"), XXXX XXXXXXXX, an
Alabama resident ("Xxxxxxxx"), and THE SYSTEM WORKS, INC., a Georgia corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to address certain matters relating
to the operations of the Company and the disposition of shares of capital stock
in the Company;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
(a) "Affiliate" shall mean a Person (other than a subsidiary) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) "Common Stock" shall mean all of the shares of Common Stock, par
value $0.01 per share, of the Company.
(c) "Form S-3" shall mean such form under the Securities Act of 1933,
as amended (the "1933 Act"), as in effect on the date hereof or any registration
form under the 1933 Act subsequently adopted by the Securities and Exchange
Commission (the "SEC") which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC;
(d) "Holder" shall mean any Person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 3(c);
(e) "Parity Holders" shall mean those Persons defined as "Holders"
under that certain Amended and Restated Registration Rights Agreement dated June
20, 1994 between the Company, Xxxxxxx, Xxxx X. Blend, III ("Blend") and the
other parties named therein (the "Blend Agreement").
(f) "Person" shall mean an individual, partnership, corporation or
other entity.
(g) "Preferred Stock" shall mean all of the shares of Series A
Preferred Stock and Series B Preferred Stock.
(h) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(i) "Registrable Securities" shall mean (i) the shares of Common
Stock held on the date hereof by Xxxxxxxx (ii) any shares of Common Stock which
Xxxxxxxx may hereafter acquire and (iii) any capital stock of the Company issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (i)-(iii)
above; and
(j) The number of shares of "Registrable Securities then outstanding"
shall be determined by adding the number of shares of Common Stock outstanding
which are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which upon issuance would be, Registrable
Securities hereunder and under the Blend Agreement.
(k) "Series A Preferred Stock" shall mean all of the shares of
Preferred Stock, par value $0.01 per share, of the Company designated as Series
A Preferred Stock.
(l) "Series B Preferred Stock" shall mean all of the shares of
Preferred Stock, par value $0.01 per share, of the Company designated as Series
B Preferred Stock.
(m) "Stock" shall mean (i) all of the shares of Common Stock of the
Company owned by Xxxxxxxx on the date hereof, (ii) all additional shares of
Common Stock and all other shares of capital stock of the Company of any class
which may hereafter be issued to Xxxxxxxx, (iii) all shares of capital stock of
any other entity which Xxxxxxxx acquires in respect of his shares of Common
Stock or other shares of capital stock covered by this Agreement in connection
with any exchange, merger, consolidation or other reorganization to which the
Company is a party.
2. STOCK RIGHTS
(a) SUBSCRIPTION RIGHT. If at any time after the date hereof and
prior to the effective date of the registration statement covering the Company's
initial public offering, the Company proposes to issue equity securities of any
kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities) of the Company (other than
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the issuance of securities (x) pursuant to the conversion of the Preferred
Stock, (y) pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other form of
reorganization, or (z) pursuant to an employee stock option plan, stock bonus
plan, stock purchase plan or other management equity program), then, if Xxxxxxxx
then holds in excess of five percent (5%) of the then outstanding shares of
Common Stock, the Company shall:
(i) give written notice to him setting forth in reasonable
detail (1) the designation and all of the terms and provisions of the
securities proposed to be issued (the "Proposed Securities"), including,
where applicable, the voting powers, preferences and relative
participating, optional or other special rights, and the qualification,
limitations or restrictions thereof and interest rate and maturity; (2) the
price and other terms of the proposed sale of such securities; (3) the
amount of such securities proposed to be issued; and (4) such other
information as Xxxxxxxx may reasonably request in order to evaluate the
proposed issuance; and
(ii) offer to issue to Xxxxxxxx a portion of the Proposed
Securities equal to a percentage determined by dividing (x) the number of
shares of Common Stock held by Xxxxxxxx and issuable to Xxxxxxxx, assuming
conversion in full of any convertible securities then held Xxxxxxxx, by (y)
the total number of shares of Common Stock then outstanding, including for
purposes of this calculation all shares of Common Stock issuable upon
conversion in full of any then outstanding convertible securities.
Xxxxxxxx must exercise his purchase rights hereunder within ten (10)
days after receipt of such notice from the Company. If all of the Proposed
Securities offered to Xxxxxxxx are not fully subscribed by Xxxxxxxx, the
remaining Proposed Securities will be reoffered to the other stockholders of the
Company who have fully exercised their subscription rights, until all such
Proposed Securities are fully subscribed for or until all such other
stockholders have subscribed for all such Proposed Securities which they desire
to purchase, except that such other stockholders must exercise their purchase
rights within five days after receipt of all such reoffers. To the extent that
the Company offers two or more securities in units, Stockholders must purchase
such units as a whole and will not be given the opportunity to purchase only one
of the securities making up such unit.
Upon the expiration of the offering periods described above, the
Company will be free to sell such Proposed Securities that Xxxxxxxx and the
other stockholders have not elected to purchase during the ninety (90) days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any Proposed Securities
offered or sold by the Company after such 90 day period must be reoffered to
Xxxxxxxx and the other stockholders pursuant to this Section.
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The election by Xxxxxxxx not to exercise his subscription rights under
this paragraph in any one instance shall not affect his right (other than in
respect of a reduction in his percentage holdings) as to any subsequent proposed
issuance. Any sale of such securities by the Company without first giving
Xxxxxxxx the rights described in this Section shall be void and of no force and
effect.
(b) TAG ALONG RIGHT. If Warburg shall elect to cause the transfer of
more than twenty percent (20%) of the capital stock of the Company which it then
holds (measured in terms of aggregate numbers of shares) in a transaction or
series of related transactions (other than the issuance of shares of capital
stock upon conversion of the Preferred Stock or a transfer to one or more of its
affiliates) pursuant to a bona fide offer from a third party (the "Buyer") who
does not desire to purchase all of the shares of Preferred Stock and Common
Stock then held by Xxxxxxxx, whether pursuant to one transaction or a series of
related transactions, Warburg shall notify Xxxxxxxx, in writing, of such offer
and its terms and conditions. Xxxxxxxx shall have the right, exercisable by
notice to Warburg given within 10 days of receipt of the terms and conditions of
the offer, to sell to the Buyer, in lieu of the sale to the Buyer by Warburg
only, on the same terms and conditions as the shares being sold by Warburg, that
number of shares of Preferred Stock and/or Common Stock which represents the
same percentage of Xxxxxxxx'x shares of Preferred Stock and/or Common Stock as
the percentage of shares of Preferred Stock and/or Common Stock that Warburg
would otherwise have sold to the Buyer but for the operation of the provisions
of this paragraph. The election by Xxxxxxxx not to exercise his rights under
this paragraph in any one instance shall not affect his right as to any
subsequent proposed sale.
The foregoing right shall terminate upon the effective date of the
registration statement covering the Company's initial public offering.
(c) CONVERSION FOR PURPOSE OF CALCULATION. For purposes of this
Section 2, Xxxxxxxx and each other stockholder of the Company, including without
limitation Warburg, holding both Common Stock and/or Preferred Stock shall be
deemed to own the number of shares of Common Stock which he or it would hold
assuming full conversion of all Preferred Stock held. Similarly all
calculations of sale percentages shall be made for purpose of this Section 2 on
an as converted basis.
3. COMPANY REGISTRATION
(a) INCLUSION IN REGISTRATION. If the Company shall determine to
register any of its securities on a form (other than Form S-8 or Form S-4 or
their successor forms) which would permit the registration of any Registrable
Securities, the Company will:
(i) promptly give to the Holders written notice thereof (which
shall include a list of the jurisdictions, if any, in which the Company
intends to qualify such securities under the applicable blue sky or other
state securities laws); and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein which must be a firm offer underwriting, all
the Registrable Securities specified in a written request or requests made
by each of the Holders, within 30 days after receipt of the written notice
from the Company described in clause (i) above; provided, however, that if
the offering is underwritten, relates only to securities to be sold by the
Company and is the first public offering by the Company of its securities
and the Holders are advised in writing by the managing underwriter that the
sale of Registrable Securities by the Holders and the Parity Holders within
120 days of the effective date of such registration statement, could
adversely affect such underwriting, the Holders shall not sell any of their
Registrable Securities included therein for 120 days after the effective
date of such registration statement (or such shorter time as the managing
underwriter may request).
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3(a). In such event the right of the Holders to
registration pursuant to this Section 3 shall be conditioned upon the Holders'
participation in such underwriting and the inclusion of the Holders' Registrable
Securities in the underwriting to the extent provided herein. The Holders shall
(together with the Company distributing its securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for underwriting by the Company and shall
use their best efforts to arrange for all documents and opinions required to be
delivered thereunder in respect of their participation as selling shareholders
to be delivered. Notwithstanding any other provision of this Section 3, if the
managing underwriter determines that marketing factors require a limitation on
the number of shares to be underwritten, then the Company shall include in the
underwriting only that number of such securities, including Registrable
Securities, which the managing underwriter believes will not jeopardize the
success of the offering (the securities so included to be apportioned as
follows: first all securities which stockholders other than the Holders and
Parity Holders seek to include in the offering shall be excluded from the
offering to the extent limitation on the number of shares included in the
underwriting is required, then the number of shares held by Holders and Parity
Holders that may be included in the underwriting shall be apportioned pro rata
among the selling Holders and Parity Holders according to the total amount of
Registrable Securities entitled to be included therein owned by each selling
Holder or Parity Holder or in such other apportions as shall be mutually agreed
to by such selling Holders and Parity Holders) but in no event shall the
aggregate amount of securities of the selling Holders and Parity Holders
included in the offering be reduced below 25% of the total amount of securities
included in such offering, unless such offering is the initial public offering
of the Company's securities in which case the selling Holders and Parity Holders
may be excluded if the managing underwriter makes the determination described
above and no securities other than those of the Company are included. If any of
the Holders or any officer or director disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other
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securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(c) NUMBER AND TRANSFERABILITY. The Holders shall be entitled to
have their shares included in an unlimited number of registrations pursuant to
this Section 3. The registration rights granted pursuant to this Section shall
be assignable at the option of each of the Holders, in whole or in part, to any
transferee of the Registrable Securities (i) so long as such transferee owns at
least 2% of the Common Stock (computed on a fully diluted basis) of the Company
or (ii) the transferee is an Affiliate of the Holder; PROVIDED, that the Company
is given written notice by such Holder at the time or within a reasonable time
after said transfer, stating the name and address of such transferee or assignee
and identifying the securities with respect to which such registration rights
are assigned.
4. EXPENSES OF REGISTRATION
All expenses incurred in connection with each registration,
qualification or compliance pursuant to Section 3 including, without limitation,
all registration, filing and qualification fees, accounting fees and printing
expenses, fees and disbursements of counsel for the Company and the reasonable
fees and expenses of one counsel for the selling Holders and Parity Holders and
expenses incidental to or required by each registration shall be borne by the
Company, provided, however, the Company shall not be required to pay an amount
in excess of $30,000 towards the fees and expenses of such counsel related to
each registration. Underwriting discounts and commissions shall be borne and
paid ratably by the Holders of the Registrable Securities included in any such
registration.
5. OTHER OBLIGATIONS OF THE COMPANY
In connection with the Company's obligations to the Holders with
respect to the sale of Registrable Securities pursuant to a public offering
thereof as provided in this Section 3, the Company shall use reasonable efforts
to register Registrable Securities as required, or permitted if any Holder so
requests, by Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") and, if the Registrable Securities to be sold meet the criteria for
listing on any exchange on which the Common Stock is then listed, apply for
listing of such Registrable Securities on such exchange.
6. REGISTRATION PROCEDURES
In the case of each registration, qualification or compliance effected
by the Company pursuant to Section 3, the Company shall:
(i) Notify each Holder as to the filing of the registration
statement prepared pursuant to Section 3 (the "Registration Statement") and
of all amendments or supplements thereto filed prior to the effective date
of said Registration Statement;
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(ii) Notify each Holder, promptly after it shall receive notice
thereof, of the time when said Registration Statement becomes effective or
when any amendment or supplement to any prospectus forming a part of said
Registration Statement has been filed;
(iii) Notify each Holder promptly of any request by the SEC for
the amending or supplementing of such Registration Statement or prospectus
or for additional information;
(iv) Prepare and promptly file with the SEC and promptly notify
each Holder of the filing of any amendments or supplements to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the 1933 Act, any
event with respect to the Company shall have occurred as a result of which
any such prospectus or any other prospectus as then in effect would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and, in addition,
prepare and file with the SEC, promptly upon the written request of any
Holder, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection
with the distribution of the Registrable Securities;
(v) Advise each Holder promptly after the Company shall receive
notice or obtain knowledge of the issuance of any stop order by the SEC
suspending the effectiveness of any such Registration Statement or
amendment thereto or of the initiation or threatening of any proceeding for
that purpose, and promptly use its best efforts to prevent the issuance of
any stop order or obtain its withdrawal promptly if such stop order should
be issued;
(vi) Use reasonable efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the Registration
Statement for sale under the securities or blue-sky laws of such states and
jurisdictions within the United States as shall be reasonably requested by
any Holder; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process generally in
any of the aforesaid states or jurisdictions; and
(vii) Furnish each Holder, as soon as available, copies of any
Registration Statement and each preliminary or final prospectus, or
supplement or amendment required to be prepared pursuant hereto, all in
such quantities as any Holder may from time to time reasonably request.
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At its expense, the Company shall keep such registration effective for
a period of one hundred twenty (120) days or until each Holder has completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the 1933 Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the 1933 Act governing the
obligation to file a post-effective amendment which reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement permit the incorporation by reference of information
required to be included above to be contained in periodic reports filed pursuant
to Section 13 or 15(d) of the Exchange Act in the registration statement.
7. INDEMNIFICATION
(a) The Company shall indemnify each Holder, each of its officers,
directors and general and limited partners, and its Affiliates, on whose behalf
registration, qualification or compliance has been effected pursuant to Section
3, and each underwriter and each Affiliate thereof, of Registrable Securities
held by or issuable to each Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the 1933 Act or any rule or regulation promulgated thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder, each of its officers, directors and partners and
each of its Affiliates, and each such underwriter and each of its Affiliates,
for any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
PROVIDED, however, that the Company shall not be liable to a Holder in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or the underwriter of any
such Holder and stated to be specifically for use therein.
(b) Each of the Holders shall, if Registrable Securities held by them
are included in the securities as to which such registration, qualification or
compliance is being effected, severally indemnify the Company, each of its
directors and officers who sign such registration statement, each Affiliate of
the Company, each underwriter, if any, of the Company's securities covered by
such registration statement, each other Holder and each Affiliate thereof
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a
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material fact contained in any such registration statement, prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such directors,
officers, employees, Affiliates, other Holders or underwriters for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds to each Holder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party, and the Indemnified Party
may participate in such defense at such party's expense, and; provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
7. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a
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material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated by
this Agreement are in conflict with the foregoing provisions, the provisions in
such underwriting agreement shall be controlling.
8. LOCKUP AGREEMENT
In consideration for the Company agreeing to its obligations under
Sections 3 through 13, each Holder agrees in connection with any registration
effected by the Company hereunder (other than (i) a registration relating solely
to employee benefit plans on Form X-0, X-0 or similar forms which may be
promulgated in the future, or (ii) a registration on Form S-4 or similar form
which may be promulgated in the future relating solely to a SEC Rule 145
transaction) of the Company's securities, upon the request of the underwriters
managing any underwritten offering of the Company's securities, not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 120
days) from the effective date of such registration as the Company or the
underwriters may specify; PROVIDED, HOWEVER, that (i) such Holder shall have no
obligation to enter into the agreement described herein unless all executive
officers and directors of the Company enter into similar agreements, and (ii)
nothing herein shall prevent any Holder that is a partnership from making a
distribution of Registrable Securities to the partners thereof that is otherwise
in compliance with applicable securities laws, based on an opinion of counsel,
which opinion and counsel are each reasonably satisfactory to the Company.
9. INFORMATION ABOUT THE HOLDERS
Each Holder shall promptly furnish to the Company such information
regarding itself, its Affiliates or subsidiaries and the distribution proposed
by it as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in Sections 3 through 13.
10. CONDITIONS OF REGISTRATION
As a condition to the Company's obligation hereunder to cause
Registrable Securities to be included in a registration statement, each Holder
shall provide such information and execute such documents as may reasonably be
required in connection with such registration. In addition, the Company shall
not be obligated to include Registrable
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Securities in a registration statement hereunder, (i) if, in the opinion of
counsel to the Company the proposed disposition of such Registrable Securities
may be effected without registration under the 1933 Act or (ii) if, in the
opinion of counsel to the Company all of such Registrable Securities may be sold
by such Holder pursuant to Rule 144 under the 1933 Act (or any successor rule)
(without giving effect to the provisions of Rule 144(k)) within a period of not
more than three calendar months from the date of such opinion.
11. RULE 144
With a view to making available the benefits of certain rules and
regulations of the SEC which may permit the sale of the restricted securities to
the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the 1933 Act at all times from and
after ninety (90) days following the effective date of the first registration
under the 1933 Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act at
any time after it has become subject to such reporting requirements; and
(c) After the Company has become subject to such reporting
requirements, so long as each Holder owns any Registrable Securities, furnish to
each Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the 1933 Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as each Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing the Holder to sell any such securities without registration.
12. RIGHTS GRANTED TO SUBSEQUENT INVESTORS
Without the written consent of Holders and Parity Holders of at least
50% of the outstanding Registrable Securities (assuming conversions), the
Company may not grant registration rights to future investors in the Company
except as described in this Section 12. The Company may grant to future
investors registration rights pertaining only to shares of the Company's Common
Stock (including shares of Common Stock into which any other securities of the
Company may be convertible) and only on the following terms:
(a) Prior to the closing of the first Company-initiated underwritten
public offering of the Company's securities, the Company shall not grant to
future investors any registration rights other than (i) the right to request
inclusion in registrations initiated by the Company, but only in respect of that
portion of such registration as is available to the Holders and the Parity
Holders, with the allocation of the number of shares to be included by
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each such holder to be pro rata based on the number of shares of the Company's
Common Stock (assuming conversion) with registration rights held by the
respective holders (including the Holders and the Parity Holders), and (ii) the
right to request registration, provided that the Holders simultaneously are
granted the right to participate in such requested registration on a
nonpreferential, pro rata basis in accordance with the relative amounts of
Common Stock (assuming conversion) with registration rights held by the
respective holders (including the Holders and the Parity Holders).
(b) The Company shall not grant any registration rights with respect
to presently outstanding securities of the Company other than the right to
participate in registrations initiated by the Company or its shareholders
(including the Holders), and such rights may be granted only as to such portion
of the registration available after all shares requested to be included in such
registration by the Holders and the Parity Holders have been so included.
13. PARTNERSHIP DISTRIBUTION
In the event that any Holder which is a limited partnership advises
the Company that it desires to exercise registration rights granted to it under
Section 3 of this Agreement as a Holder of Registrable Securities in order to
effect a distribution of some or all of such Registrable Securities to its
partners, then, notwithstanding any provision of this Agreement conditioning the
inclusion of Registrable Securities in a registration statement upon the
Holder's participation in an underwriting, such Holder may refrain from
including such shares in an underwriting and nevertheless cause such shares to
be included in the applicable registration statement, provided only that (a)
such registration is not the initial registration hereunder of the Company's
securities, and (b) such Holder agrees not to effect such distribution until the
expiration of a standstill period after the effective date of such registration,
such period, not to exceed 90 days, to be of that duration requested by the
managing underwriter of the underwriting of the other securities included in
such registration.
14. TERM OF AGREEMENT
This Agreement shall continue as to each party to this Agreement for
as long as any such party owns stock of the Company.
15. REPRESENTATION AND WARRANTY OF THE COMPANY.
The Company hereby represents and warrants to Xxxxxxxx that the rights
granted to Xxxxxxxx under this Agreement with respect to the Stock are the same
in all material respects as the rights Blend has with respect to the shares of
Common Stock owned by Blend.
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16. MISCELLANEOUS.
(a) NOTICES. All notices, request, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given as
delivered personally, sent by courier or mailed, registered mail, return receipt
requested:
(i) To Warburg:
Warburg, Xxxxxx Investors, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
(ii) To Xxxxxxxx:
Xxxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
(iii) To the Company:
The System Works
0000 Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
(b) ASSIGNMENT. Except as otherwise provided in Section 3(c) hereof,
this Agreement shall not be assignable by any party hereto.
(c) SURVIVAL. This Agreement and the obligations of the parties
created hereunder shall survive any termination of employment or disability of
Xxxxxxxx.
(d) ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matters
covered hereby. This Agreement shall not be modified or amended except by an
instrument in writing signed by or on behalf of each of the parties hereto.
(e) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Any telecopy of a
party's signature shall constitute an original signature for purposes of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE SYSTEM WORKS, INC. WARBURG, XXXXXX INVESTORS, L.P.
By: Warburg, Xxxxxx & Co.,
its General Partner
By: /s/ Xxxxxxxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------- -----------------------------
Title: President and CEO Title: Managing Director
------------------------- -----------------------------
/s/ Xxxx X. Xxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxx
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